IMF asks FBR for timeline to bring 3m retailers into tax net

ISLAMABAD: The International Monetary Fund (IMF) has inquired from the Federal Board of Revenue (FBR) for ascertaining the exact timeframe for unveiling the simplified retailers scheme in order to bring 3 million shopkeepers into the tax net. The FBR replied to the IMF that it would be the decision of the incoming minister for finance, who would take the final decision on this subject. “The retailers scheme is already prepared and will be announced when the government will firm up its decision and grant approval for moving ahead,” top official sources confirmed to The News here on Thursday night.

The IMF team, led by Mission Chief Nathan Porter and FBR high-ups, held a virtual meeting on Thursday night whereby the IMF also inquired about the FBR’s plan for achieving the desired target of Rs9,415 billion on June 30, 2024.

“The IMF also inquired about the FBR’s capability to collect taxes from 3 million retailers,” the sources said and added that the FBR told the IMF team it has deputed 147 district officers all over the country for broadening of tax base. Tackling 3 million potential taxpayers with such a meagre strength of just 147 district revenue officers, who are already burdened with the task of bringing other potential tax dodgers into the tax net, would be a hard nut to crack.

Secondly, the FBR assured the IMF team that they would be able to achieve March 2024 tax collection target of Rs879 billion for the current fiscal year. The FBR had faced a revenue shortfall of Rs33 billion in February 2024 and it would be crucial to achieve the ongoing monthly target in order to avert additional taxes for the remaining period of the current fiscal year. The FBR has already prepared a simplified retailers scheme. PRAL (Pakistan Revenue Authority Limited), a subsidiary of the FBR, has developed the mobile App “Tajir Dost”, which is a national business registry in which all retailers and traders will have to register. Already registered persons will have their names in the Tajir Dost database.

It is proposed that the quantum of indicative income to be determined equal to the annual rental value (determined at 10% of shop valuation) may be accepted as the purpose to document the retail business and ensuring subsequent filing of income tax returns.

The FBR is considering bringing online retailers into the tax net. The working has been underway in consultation with online marketplaces such as Daraz and others; it is yet to be seen how these online retailers will be brought into the tax net.

The scheme does not provide any concessional tax rates to shopkeeper except (i) an early bird discount of 50% tax reduction on filing of tax return for Tax Year 2023 between the date of announcement of scheme and the date of first installment of payment; (ii) a 25% discount of tax if a lumpsum payment for the entire year is made (For current year this will mean the installments of four months between March and June, 2024).

The Tajir Dost App has been designed with user friendly features requiring minimal entry of data and it minimizes the contact between shopkeeper and his tax consultant as well as shopkeeper and tax collector. The App will automatically calculate the monthly tax payment, keep the record and will facilitate the shopkeeper to pay the same. The scheme will cover all shopkeepers providing services or supplies of goods, including professions, etc.

The income tax paid under the scheme will be an advance tax to be treated as minimum tax but adjustable against total income tax payable for FY2024 and similar treatment for next tax years i.e. there will be no refund of income tax paid under this scheme.

The shopkeeper will assess himself for FY2024 (and subsequently) like the any other taxpayer will file his annual income tax return as per the standard income tax return forms and can claim the adjustment or refund of other adjustable advance taxes deducted or collected already in other heads e.g. on purchase of a motor vehicle, etc. The defaulters of monthly payments will face penal consequences like shop sealing or imposition of monetary penalty equal to his monthly instalment due.

The scheme excludes companies that are operating as a unit of national or international chain stores or a firm of professionals with international affiliation and operating in offices in more than one province. The scheme, however, includes all other Tier-I retailers as envisaged under the sales tax as the scheme is being launched under the income tax.